Property Metrics: In-Depth Cap Rate Definition

An in-depth look at the capitalization rate and the various ways it can be determined, calculated, or estimated. The article also provides information on how the cap rate can be used to determine the value of a property but to also define market trends in property valuations of like-kind properties. The risk premium of an acquisition is addressed and a deep dive is undertaken regarding cap rates, the  discounted cash flow analysis, the weighted average cost of capital, and the Gordon Model. More information about cap rates than perhaps one knew was available.
Svikhart & Associates, a Salt Lake City-based real estate services company, focuses on asset management, brokerage listings and sales, and all aspects of a multifamily investment. Specific diligence regards property operations and strategies to maximize asset performance and value. Additionally, the firm assists owners regarding economic, financial and market factors that impact returns on investment. The firm targets ‘Mid-Tier’ assets which it defines generally as 10-to-60-unit properties.
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